Apple's 2012 profits forecast to be highest of any public company ever

Posted:
in AAPL Investors edited January 2014
This year, Apple could generate the highest annual net income of any publicly traded company in history, according to one Wall Street analyst.

Brian White with Topeka Capital Markets said in a note to investors Monday that he has heard analysts and market pundits over the last several weeks discuss the point of a $500 billion market cap as a barrier to further price upside at companies in the past. Some on Wall Street have theorized the $500 billion market cap threshold is a "barrier" for stocks.

These people are concerned that a similar scenario could happen with Apple, preventing the company from pushing much further past the $500 billion mark. As of Monday morning, Apple's market cap was at about $545 billion.

The line of thinking among some on Wall Street is that companies that exceed $500 billion in market capitalization have trouble growing much beyond that point. But White believes Apple's market cap potential in trillions of dollars, not billions.

"We went back and analyzed five U.S.-based companies that at one time enjoyed market capitalizations of (about) $500 billion or more, but found little similarities with Apple," he wrote.

Those five companies were Cisco Systems, Exxon-Mobile, General Electric, Intel, and Microsoft. With the exception of Exxon, these companies had rich price-to-earnings ratios when they crossed the $500 billion mark, and the tech companies had what White called "monopoly-like market share positions."

Stock


But Apple does not have a stranglehold on most markets where it competes. Instead, there is plenty of room for growth in the booming smartphone market.

"Microsoft held over 90% market share for PC operating systems at the peak cap, while Cisco had over 70% share in the networking market and Intel had over 80% of the PC processor market," White said. "By comparison, IDC estimates that Apple held just 4.7% of the PC market in (the first quarter of 2012) and 8.8% share in the mobile phone market."

Apple's iPad does dominate in the tablet market, with an estimated 68 percent share of shipments in the first quarter of 2012, but White noted that it's a market category that Apple invented.

White expects that in calendar year 2012, Apple is poised to generate the highest profits of any publicly traded company ever. Compared to the "big three" technology companies that have exceeded a $500 billion market cap, he believes Apple's net income will over over six times higher on an individual basis to when those companies were at their respective peaks.

In addition to its relatively low market share, Apple stock is currently trading at just 8.4 times White's estimates for calendar year 2013 earnings per share, excluding cash. In comparison, the three technology companies that have crossed the $500 billion threshold — Microsoft, Intel and Cisco — had price-to-earnings ratios of over 80 times.
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Comments

  • Reply 1 of 118

    Quote:

    Originally Posted by AppleInsider View Post

    "Microsoft held over 90% market share for PC operating systems at the peak cap, while Cisco had over 70% share in the networking market and Intel had over 80% of the PC processor market," White said. "By comparison, IDC estimates that Apple held just 4.7% of the PC market in (the first quarter of 2012) and 8.8% share in the mobile phone market."




    Apple's iPad does dominate in the tablet market, with an estimated 68 percent share of shipments in the first quarter of 2012, but White noted that it's a market category that Apple invented.


     


     


    Apple's phone business is currently the biggest single source of profits.  In my opinion, the market has a huge growth potential as emerging markets shift to smartphones and Apple continues to market older models (which have a low marginal cost) to these new markets.  Apple has solid products at various price points in the phone game.  Not only are they well positioned to capture sales in new markets, even established markets are experiencing double-digit rates of conversion to smartphones, and in these markets, Apple can  sell huge numbers of its latest and greatest iterations at early-adopter prices.


     


    With tablets, things are much less clear.  Apple currently dominates, and so, only a growth in the market itself could result in greatly increased sales for Apple.  Will the tablet market grow as fast as smartphone market?  Will margins remain attractive, like they have in the phone biz?  Time will tell.  


     


     


    The PC market is not going to grow nearly as fast as the smartphone or the tablet markets.  It is not a prime source of profits anymore.  Apple can concentrate on niches within the overall market, but overall, there's less potential.

  • Reply 2 of 118
    smiles77smiles77 Posts: 668member


    I think we're years yet away from the time when we're not blown away by Apple's growth and earnings.

  • Reply 3 of 118
    macarenamacarena Posts: 365member


    Considering how small Computers have become, as a percentage of Apple's Revenue and Profits, it is indeed strange that Apple still insists on high margins in this space. In Apple's own reckoning, the PC market is a dying market, and the future is in tablets. Then why don't they lower their margins and make a play for increased marketshare?


     


    Today, the barrier to developing iPhone and iPad software is significantly higher than the barrier to develop Android Software. You absolutely need a Mac to build iOS software. And with Apple's prices, this is a stiff entry barrier indeed.


     


    Even if Apple lowers margins on Macs to 10%, it will not hurt their bottom line in a significant way. And in all likelihood, the resulting increase in sales will more than make up for the lower margins.

  • Reply 4 of 118
    melgrossmelgross Posts: 33,510member

    Apple's phone business is currently the biggest single source of profits.  In my opinion, the market has a huge growth potential as emerging markets shift to smartphones and Apple continues to market older models (which have a low marginal cost) to these new markets.  Apple has solid products at various price points in the phone game.  Not only are they well positioned to capture sales in new markets, even established markets are experiencing double-digit rates of conversion to smartphones, and in these markets, Apple can  sell huge numbers of its latest and greatest iterations at early-adopter prices.

    With tablets, things are much less clear.  Apple currently dominates, and so, only a growth in the market itself could result in greatly increased sales for Apple.  Will the tablet market grow as fast as smartphone market?  Will margins remain attractive, like they have in the phone biz?  Time will tell.  


    The PC market is not going to grow nearly as fast as the smartphone or the tablet markets.  It is not a prime source of profits anymore.  Apple can concentrate on niches within the overall market, but overall, there's less potential.

    The tablet market has a long way to go before growth slows to low double digits. I can see the market supporting well over a 500 million a year sales level, with Apple having a very large portion of that, possibly even a majority, particularly if they do come out with a smaller less expensive 7.85" model.

    And don't forget that while Windows PC growth is slowing and even shrinking at times, Apple's Mac growth is still solid.

    And we don't know where else they may be going.

    With the agreement with at least 9 major auto makers to put a Siri button on the steering wheel (a major, and shocking development according to friends in the auto business), Apple is getting in front of that business. How far it will go is anyone's guess right now, but we can be sure that Apple has plans for this that go further than it may now seem.

    Then there is what seems to be the age old question of an actual Tv of some kind. Estimates are that if Apple gets just 2% of the Tv market, that could be $11 billion that year for them. If their sets cost the $2,000 average predicted, it could be more than 2%, as $2,000 is just the average price for a large screen advanced model, which go over $4,000.
  • Reply 5 of 118
    solipsismxsolipsismx Posts: 19,566member
    Off topic: I think it'll be the same people that will claim "Steve would have never done this" for anything Apple does that don't like (even if it happened during his watch), and that any positive changes that Apple makes since Steve's passing will be the result, not of Tim Cook's leadership of other people at Apple, but actions Steve put in place before he stepped down as CEO. Even if Apple becomes the first trillion dollar publicly traded company it'll just a be a fluke and/or have nothing to do with the current efforts from Apple. Can Apple ever win?

    melgross wrote: »
    And don't forget that while Windows PC growth is slowing and even shrinking at times, Apple's Mac growth is still solid.

    I am expecting to see a new Mac campaign this year. ML launching less than a year after Lion, almost all Macs updated this summer, amazing changes to the MBP that can't be met by other vendors, and Win8 being a complete logistical mess for users tell me it's perfect storm to increase Mac growth even faster.
  • Reply 6 of 118
    flaneurflaneur Posts: 4,526member
    Before someone else says it, Apple did not invent the tablet category. What they did invent was the first usable, attractive tablet.

    This category that they did invent will grow to take over most of the PC industry, because it's what more people need in more places. It will take over the book and magazine industry as well, maybe also news and TV. Huge growth lies ahead.

    The phone category is really the pocket computer category, or better, the pocket communication and knowledge terminal. Everyone in the world is the market for these.

    The next category is wearable. Eyeglass screens, eyeglass cameras, etc.

    Old concepts of growth limits do not apply to a company that is behind a new industrial revolution. Actually a new postindustrial revolution that doesn't even have a name yet, as far as I know. The Tofflers' Third Wave doesn't capture what we're dealing with. It's unprecedented, so new horizons in thought are called for.

    Edit: I see Mel Gross tossing out 500 million a year for tablets. I don't know about that kind of number, but that's the kind of talk we ought to be seeing. The future is huge.

    Edit 2: At this point, we can say that Apple shows the computer industry to really be the communications, knowledge and arts/entertainment industry. It has been doing this from the garage days, still doing it, humanizing the Turing machine. Other companies give this humanizing only lip service, while they're bound by engineering, not art or even much design.
  • Reply 7 of 118

    Quote:

    Originally Posted by macarena View Post


    Then why don't they lower their margins and make a play for increased marketshare?



     


    Uhm, while I agree that Apple could lower their profit margins somewhat to drive adoption rates in several areas, I don't think the Macs are the prime candidate here. Look at the MacBook Air or the iPad, no one else can match the quality and the prices there so far.


     


    I do understand your argument about the entry price for developers, but a used Mac Mini can be had for less than $500 these days and you don't need the latest and greatest to code...

     

  • Reply 8 of 118
    gprovidagprovida Posts: 258member


    Once again the evidence shows the market is utterly incapable of figuring out how to value Apple.  In any fundamental sense, Apple is a huge bargain by integer multiples in value, at less than X10 EPS and has huge profits going forward and similar over the last 16+ quarters!! It has terrific growth opportunities in all markets its involved.  Yet Amazon and Facebook have huge EPS with little to no profit and to support their valuation.  


     


    Is this because Apple is so unique, markets treat Apple like a series of one off successes [imac, iPod, iPhone, Macbook Air, iPad, ...] and so are waiting for the bust, manufacturing/hardware can't be this successful for this long [its a freak of nature], it violates all the MBA training [Clay Christensen'c view all successful companies are doomed because of MBA training], ....?


     


    Is Apple's model learnable and can it be duplicated by others across a wide range of products and industries?  Doubtful, but does anybody understand it to teach it?

  • Reply 9 of 118
    umrk_labumrk_lab Posts: 550member


    Spring 2015 : Tim announces that from now on, the Apple enormous cash resulting from recurrent revenues driven from immaterial content (advertising, music, films, press ..) enable the company to distribute its electronic consumer products at 99 cents unique price (at this point, the French people, who always like to complain, argue that this is unfair, because 99 Euros cents are a lot more than 99 US $ cents.


     


    At this point, analysts just give up : recognizing that they will never understand Apple business, except that it is exceptionnaly profitable, they simply strongly advise to buy Apple shares at any price.

  • Reply 10 of 118

    Quote:

    Originally Posted by melgross View Post



    With the agreement with at least 9 major auto makers to put a Siri button on the steering wheel (a major, and shocking development according to friends in the auto business), Apple is getting in front of that business. How far it will go is anyone's guess right now, but we can be sure that Apple has plans for this that go further than it may now seem


     


    Then there is what seems to be the age old question of an actual Tv of some kind. Estimates are that if Apple gets just 2% of the Tv market, that could be $11 billion that year for them. If their sets cost the $2,000 average predicted, it could be more than 2%, as $2,000 is just the average price for a large screen advanced model, which go over $4,000.


     


    The auto accessory market has huge potential.  I wonder if people will get dedicated 4G accounts for their cars.  If so, built in screens could provide streaming entertainment coast to coast.


     


     


    I wonder what the high end sets capture as a proportion of the overall TV market.  My impression is that while there are always 70 and 80 inch displays in the TV department, the cheaper ones sell fastest.  It is a market I know little about, however.

  • Reply 11 of 118

    Quote:

    Originally Posted by macarena View Post


    Considering how small Computers have become, as a percentage of Apple's Revenue and Profits, it is indeed strange that Apple still insists on high margins in this space. In Apple's own reckoning, the PC market is a dying market, and the future is in tablets. Then why don't they lower their margins and make a play for increased marketshare?


     


    Today, the barrier to developing iPhone and iPad software is significantly higher than the barrier to develop Android Software. You absolutely need a Mac to build iOS software. And with Apple's prices, this is a stiff entry barrier indeed.


     


    Even if Apple lowers margins on Macs to 10%, it will not hurt their bottom line in a significant way. And in all likelihood, the resulting increase in sales will more than make up for the lower margins.



     


    If the price of a Mac is a "barrier to developing iPhone and iPad software"... then, the developer is in the wrong business.  Hell, he needs to invest in some basic tools, even to work on his own bicycle.

  • Reply 12 of 118
    iqatedoiqatedo Posts: 1,822member

    Quote:

    Originally Posted by macarena View Post


    Considering how small Computers have become, as a percentage of Apple's Revenue and Profits, it is indeed strange that Apple still insists on high margins in this space...


     


    Today, the barrier to developing iPhone and iPad software is significantly higher than the barrier to develop Android Software. You absolutely need a Mac to build iOS software. And with Apple's prices, this is a stiff entry barrier indeed...



    So, 'the barrier to developing iPhone and iPad software is significantly higher than the barrier to developing Android software'.  Does this mean that developers are leaving iOS for Android?  A couple of grand on a 27" iMac that in my case is running OS X, win 7 and Linux without fault is hardly a barrier to a developer.  I can understand your desire to have Apple take less of your hard earned money but I'd rather a successful Apple, even if I have to pay a little more, if indeed I am.

  • Reply 13 of 118

    Quote:

    Originally Posted by gprovida View Post


     


    Is this because Apple is so unique, markets treat Apple like a series of one off successes [imac, iPod, iPhone, Macbook Air, iPad, ...] and so are waiting for the bust,


     


    Yes.


     


     


     


    manufacturing/hardware can't be this successful for this long [its a freak of nature],


     


     


    No.


     


     


     


    it violates all the MBA training [Clay Christensen'c view all successful companies are doomed because of MBA training], ....?


     


     


    Maybe a little.


  • Reply 14 of 118
    flaneurflaneur Posts: 4,526member
    gprovida wrote: »
    Once again the evidence shows the market is utterly incapable of figuring out how to value Apple.  In any fundamental sense, Apple is a huge bargain by integer multiples in value, at less than X10 EPS and has huge profits going forward and similar over the last 16+ quarters!! It has terrific growth opportunities in all markets its involved.  Yet Amazon and Facebook have huge EPS with little to no profit and to support their valuation.  

    Is this because Apple is so unique, markets treat Apple like a series of one off successes [imac, iPod, iPhone, Macbook Air, iPad, ...] and so are waiting for the bust, manufacturing/hardware can't be this successful for this long [its a freak of nature], it violates all the MBA training [Clay Christensen'c view all successful companies are doomed because of MBA training], ....?

    Is Apple's model learnable and can it be duplicated by others across a wide range of products and industries?  Doubtful, but does anybody understand it to teach it?

    Great post. What Apple is doing doesn't even have a name yet much less a rationale. You can't teach what you don't understand.
  • Reply 15 of 118
    philboogiephilboogie Posts: 7,675member
    umrk_lab wrote: »
    (...)at this point, the French people, who always like to complain, argue that this is unfair, because 99 Euros cents are a lot more than 99 US $ cents.

    You leave the French out of this! (insert a smiley here; I don't use them)

    I'm Dutch, and complain that they charge € 2279 for a MBPr which does ? to $ 2199. It's actually € 1814, but there's the (State/Value Added) Tax thing to consider, but I digress.
  • Reply 16 of 118
    jj.yuanjj.yuan Posts: 213member


    Just curious. Are there private companies who make more profit than Apple?

     

  • Reply 17 of 118
    drblankdrblank Posts: 3,385member

    Quote:

    Originally Posted by melgross View Post







    Then there is what seems to be the age old question of an actual Tv of some kind. Estimates are that if Apple gets just 2% of the Tv market, that could be $11 billion that year for them. If their sets cost the $2,000 average predicted, it could be more than 2%, as $2,000 is just the average price for a large screen advanced model, which go over $4,000.


    Actually, Apple, could potentially market the "Apple TV" any one or more of three different ways.  1.  They can continue to put out more Apple TV boxes like they have for the entry level market.  2.  If they made a more powerful motherboard, they could market it as an OEM - Co-marketed product with any HDTV mfg to integrate the board with a built-in video camera and the HDTV company makes the final product and they co-market it. Apple could generate additional revenue by selling apps/content through their App Store and iTunes Music store which gets streamed or stored in SSD memory inside the TV.  3.  Design and build the entire TV set using a OEM panel.   The first is already building in market share.  The second method could be marketed using any or all of the various screen technologies by different companies under various names that want to leverage Apple's strength in the iPad/iPhone market as those devices are easily connected and can be used as a remote control, or simply using a Mac/keyboard/trackpad.  The Pros are wider almost immediate revenue generation as they can sign up a variety of mfg that already have brand recognition as well as going after the three price categories (low, med, high).  currently, HDTVs go from the $300 small panel 720p screens on up to the $100K+ 100inch 1080p or the next generation 4K panels which are being shown. Yes, Apple will generate revenue, albeit less than if they made their HDTV, but probably a little more than the entry level system.  And the third method by designing and mfg their own HDTV, it would generate more revenue/profits providing it is in the category that sells to the sweet spot of the market, but the biggest challenge is what type of panel to use and generating enough brand recognition as a HDTV mfg.  The problem is that while Plasma is still considered the best picture quality, it is fragile and more costly.  LCD is less costly and more widely sold, it is still not as good as a plasma in picture quality.  OLED is still new, expensive and they have their own set of problems to overcome due to organic materials which decay over time thus effecting the long term quality.  EIther way, between the various mfg, obtaining the right screen technology and remaining competitive may prove to be difficult.  Apple can do all three or any combination.  It all depends on how serious and how much they invest in the market to grab a significant portion of the market potential.

  • Reply 18 of 118
    macinthe408macinthe408 Posts: 1,050member

    Quote:


    "Microsoft held over 90% market share for PC operating systems at the peak cap, while Cisco had over 70% share in the networking market and Intel had over 80% of the PC processor market," White said. "By comparison, IDC estimates that Apple held just 4.7% of the PC market in (the first quarter of 2012) and 8.8% share in the mobile phone market."



     


    This is just fucking amazing. 

  • Reply 19 of 118
    mj1970mj1970 Posts: 9,002member


    It would be interesting to put this is in better historical context by adjusting these numbers for inflation.

  • Reply 20 of 118
    apple ][apple ][ Posts: 9,233member

    Quote:

    Originally Posted by macarena View Post


    Today, the barrier to developing iPhone and iPad software is significantly higher than the barrier to develop Android Software. You absolutely need a Mac to build iOS software. And with Apple's prices, this is a stiff entry barrier indeed.


     


     



     


    I disagree. A Mac Mini is pretty damn cheap and anybody who can't afford a Mac has zero business developing any software for Apple.


     


    I don't want bums and homeless people to be making iOS apps. Let them stick to Android software. 

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